Veterans' Labor Force Participation: What Role Does the VA's Disability Compensation Program Play?

Abstract

We explore time trends in the labor force participation of veterans and non-veterans and investigate whether they are consistent with a rising role for the Department of Veterans Affairs' Disability Compensation (DC) program, which pays benefits to veterans with service-connected disabilities and has grown rapidly since 2000. Using 35 years of March CPS data, we find that veterans' labor force participation declined over time in a way that coincides closely with DC growth and that veterans have become more sensitive to economic shocks. Our findings suggest that DC program growth has contributed to recent declines in veterans' labor force participation.